Tuesday, March 13, 2012

Why owning a house may not be the American Dream

Lots of societies outside of America seem to have a preference for home-ownership. I have spoken to policy makers and scholars in several countries--India, Bangladesh, South Africa, Peru--about the importance of a well functioning rental sector. Rental housing allows for mobility, and for people to use savings to invest in such things as small businesses. Rental housing is also a way for small entrepreneurs to earn a return on investment.

Yet everywhere I go, I am told that people don't want to rent, they want to own. The principal reason seems to be security of tenure; in places where enforcement of contracts remains an issue, fear of abuse by landlords sours people on renting as an option. And so it is that people want to be owners.

Many countries in Western Europe--Germany and Switzerland in particular--do not have fetishes about homeownership. But tenant protections in these countries are strong (see this piece on Germany and this piece on security of tenure beyond lease terms in Switzerland), so renting is sort of "owning-light" in these countries.